A British man accused of plotting a potential Mumbai-style attack was secretly recorded ranting in his car saying: " Terrorist - that's a great word," a court heard.

Erol Incedal, 26, from London, is on trial at the Old Bailey charged with preparing for an act of terrorism and possessing a terrorist document about bomb making.

The Old Bailey trial, which is being heard partly in secret, has heard his plans were scuppered after police stopped him for a motoring offence on September 30 and bugged his black Mercedes car. Two weeks later he was arrested on suspicion of being a terrorist.

Today the jury listened to a recording of a bugged conversation Incedal had with co-defendant Mounir Rarmoul-Bouhadjar about the definition of extremism and terror on October 6 last year.

Speaking in a heavy south London accent, Incedal said: "What does radical mean? Radical means you follow your principles to the core. Extremist: that's the word we don't agree with. We are not extreme. They are saying we are being extreme with our religion. We are not extreme with our religion."

Rarmoul-Bouhadjar agreed: "We are not extreme - we are normal."

Incedal said: "They say we are extremist with our terror. We are not extreme with our terror. That's the word. Radical is a very good word. It's actually a very upper class word."

Rarmoul-Bouhadjar queried: "Radical?"

Incedal replied: "Yeah, to be radical. Did something radically. Radical just means to be very quick and hasty in a particular change...."

Rarmoul-Bouhadjar: "Mmmmm"

Incedal went on: "...In a particular way. It's not a bad word. Extremism - what they try to say is bad, like they do it in a bad way. They name us in a bad way.

"Another word - terrorist. That's a great word. Terrorist. That's a great word, Mounir. There's never been a greater word than that, that's been used to describe us."

In an earlier recording, Incedal was alone watching violent Jihadist videos with music and gunfire in the background as he chanted: "God willing....our road is long...come to Jihad."

And in another extract from October 3 last year, the pair appeared to discuss a firearms deal in the car.

Incedal said: "It's only about a grand so...I don't think it's going to be a great quality."

When Rarmoul-Bouhadjar asked if it would fire, Incedal said: "It will. It's not a replica."

Rarmoul-Bouhadjar replied: "Better than nothing."

Incedal sat in the dock wearing earphones to listen to the recordings as they were played by the prosecution and wore thick black-rimmed spectacles to follow transcripts.

He denies the charges against him. Rarmoul-Bouhadjar, also 26, from London, has admitted possessing a terrorist document.

Later, the jury heard further excerpts of conversations which took place a couple of days before Incedal and Rarmoul-Bouhadjar were arrested by armed police.

On October 11 last year, they discussed the weather on an apparent trip to Syria and Incedal said: "It was like minus 20 degrees because we were on a mountain."

On October 12 last year, the listening device picked up a patchy and indistinct conversation between Rarmoul-Bouhadjar and Incedal about American drone attacks and the CIA.

After Rarmoul-Bouhadjar described the UK as the "most safest" country, Incedal said: "If someone was gonna try to go in there, kill people ... parliament, take out the prime minister..."

Rarmoul-Bouhadjar suggested: "Any moment they can just call a drone attack."

Incedal said: "Why would they make drone strikes, you idiot? They like drones, they cannot bomb. I'm pretty sure London's not one of the countries that they can bomb. They pretty much own London, man."

Just before the pair were arrested on October 13 last year, they were heard on tape talking at length about Muslims fighting against the Israeli state.

The trial then continued in a private session without members of the public and non-accredited journalists.